Motor insurance prices have fallen to the lowest level recorded in the UK since 2015, the Association of British Insurers (ABI) has found.
The findings show that the average price for comprehensive motor insurance was £416 in the first quarter of 2022, signifying a 5% drop year-on-year, and the cheapest premiums since the third quarter of 2015.
While it is too early to assess the impact of the Financial Conduct Authority’s (FCA) changes to pricing rules introduced at the start of the year, the research indicates an increase in the difference between new and renewed premiums.
The average premium paid for a new policy in the first quarter was £105 higher than for renewals. The average premium for new policies was £480, up £34, on the same quarter in 2021, while the average for renewed policies, at £375, fell by £55.
The ABI said that the drop will have given some much-needed relief to many households facing rising energy and food bills, with inflation currently at its highest rate for 30 years.
Director for general insurance policy, James Dalton, said: “Like other sectors, motor insurers face rising costs.
“While it is going to be extremely challenging for these to be absorbed, insurers are doing all they can to keep prices as competitive as possible as millions of household cope with the cost of living crisis.”
The ABI said that the continued global shortage of semiconductors, made worse by the impact of the Covid pandemic and the Russian invasion of Ukraine, are driving up costs for motor insurers.
The average car can contain up the 3,000 semiconductor chips, and their shortage impacts on vehicle repair times.
Rising used car prices reflecting, in part, longer new car delivery times, more expensive repairs, coupled with rises in the price of raw materials such as paint, and a shortage of skilled labour, are also adding to costs.
Dalton added; “As the FCA has said, the impact of their reforms to pricing rules introduced on 1 January this year could lead to some consumers paying higher prices if they used to benefit from significant new business discounts.
“For some, it could still pay to shop around for the policy that best meets their needs.”
Image credit: iStock
Author: Chris Seekings